NEW ORLEANS (AP) — The level of interest in new oil and gas exploration in the Gulf of Mexico is slowing due to the low price of oil, but federal regulators said they remain optimistic about the future of offshore drilling.
Only 195 bids were placed Wednesday for leases in an area comprising 41 million acres in the central parts of the Gulf of Mexico off the coasts of Louisiana, Mississippi and Alabama. At last year's equivalent sale, oil companies submitted 380 bids. Past years have drawn more than 500 bids.
This year saw the lowest number of bids since 1986 when 129 were submitted for the Gulf's central area, according to the Bureau of Ocean Energy Management. It says the low price of oil can account for the lackluster interest. In 1986, the economy also saw a drop in oil prices that resulted in a serious oil bust.
Revenues from offshore drilling in U.S. waters are an important source of income for the federal government. Last year drilling in the Gulf brought in about $7 billion in revenues, according to the Office of Natural Resources Revenue.
"It's a very small sale," said Salah Dean ElDarragi, a senior marine geophysicist and owner of Gulf Ocean Services, an offshore surveying company based in Lafayette. "It's predominantly because of the price of oil.
These companies can't make any money out there at these prices."
Interior Secretary Sally Jewell, in making her first visit to an offshore lease sale, said companies are being choosy about where to invest. Exploration in the Gulf is expensive and the industry is pushing into deeper reservoirs found far offshore.
Jewell said low oil prices are behind the decrease in bids. She said companies are looking for easier prospects.
"(Companies) are going to be looking at time-frames," Jewell said. "They're going to be trying to decide whether they want to place a bid at this time or whether they want to keep their powder dry and go to something that may be a little less exploratory and more of a sure thing."
The leases up for sale Wednesday are considered among the most productive and sought-after because they fall within the Central Planning Area, one of three areas that divide the Gulf. The central area is the busiest place for offshore oil drilling in the nation. It is an area roughly the size of Washington state.
In all, 42 companies submitted bids covering 923,700 acres of the Gulf at Wednesday's sale. The high bids were valued at $538 million. Regulators have 90 days to evaluate the bids.
The highest bid was made on a lease in the Walker Ridge area for $52 million, another indication of the industry's push into deeper waters. Walker Ridge sits more than 100 miles offshore.
This lease sale also saw blocks for sale along the border with Mexico in the Gulf. There were no bids placed on those blocks — unlike a previous sale of leases in western Gulf waters which saw some interest in new blocks along the Mexican border.
Officials said the opening of the new blocks is the result of a new trans-boundary deal the U.S. and Mexican governments have struck.
Jewell said American regulators are working their Mexican counterparts to develop and encourage more oil and gas drilling. A delegation of Mexican government officials attended Wednesday's lease sale.
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Posted on Fri, March 20, 2015
by Cain Burdeau, Associated Press